Check 21: Image Is Everything

The latest in capture technology gives CUs entrée into new markets.

July 11, 2011

Even though the volume of checks written gradually declines each year, credit unions should continue to invest in check-capture technologies that automate item processing and lower costs, says Andrew Tilbury, director of marketing and communications at Bluepoint Solutions Inc.

The two main variants of Check 21 technology are in-branch capture in both the back office and at the teller line, and remote capture at ATMs, merchant locations, at home, or via members’ smartphones.

Tilbury says Chase promoted the launch of its mobile capture product with a massive ad campaign—the newlyweds in bed depositing wedding gift checks on a smartphone—that stressed 24/7 convenience, available anytime, anywhere. “This made consumers immediately aware of the technology. All of a sudden, the paper check—on the verge of becoming obsolete—had once again become a useful payment instrument.”

The capture technology Bluepoint Solutions offers uses an image quality assurance engine to process check images, taking into account irregular angles and adverse lighting conditions.

“More than one-third of consumers own smartphones, but only a handful of financial institutions offer mobile deposit applications,” says Tilbury. “The mobile deposit movement is at its nascent stage. No one knows exactly how mobile deposit will affect the payments industry. It has the ability to revolutionize how consumers conduct financial transactions.”

Best of all, Tilbury sees mobile capture as a way for credit unions to retain members who move away. “Mobile deposit makes it easier for members to maintain their relationship with you no matter where they move.”

Matthew Bowen, senior vice president of check and document image solutions at FIS, says smartphone deposit capture is essentially self-service. “You’re seeing a gradual shift from full- to self-service, including loan payments and deposits. Consumers are looking for convenience, and remote deposit capture [RDC] appeals to younger people who like self-service channels.”

However, Bowen sees a small challenge with older members: “They might have smartphones, but many aren’t used to using the added capabilities they provide, such as cameras. So there’s a learning curve. But after they’ve done it one or two times, they have no problems.

“The smartphone is very appealing compared with a scanner/personal computer [PC] combination,” he continues. “There’s no Web-based log-in, no scanner warm-up, and it’s not tied to one location.”

The other form of remote capture technology Bowen refers to, a PC-connected scanner, is now familiar to consumers. More than one-third of U.S. households now have scanners, which have become an inexpensive technology.

“The three components that make RDC function are now readily available,” says Michael Pratt, chief marketing officer at Panini, a CUNA Strategic Services alliance provider. “They are Internet-based software that enables capture and encryption, an Internet connection, and conversion technology—a device that can read MICR. We offer a device that fits in the hand, is easily located next to the desktop, and is currently priced at less than $300.”

Catering to merchants

Pratt says rapidly developing RDC technology offers credit unions entrée into the small-business market.

“We’ve found that small businesses typically are underserved or overserved,” he says. “They either get a standard retail offering, which might be free but is consumer-oriented, or they get a corporate offering that’s feature-rich but prohibitively expensive.”

But the technology has come a long way. “In 2004, when Check 21 was introduced, check-scanning machines were big and expensive, often located at major centralized installations,” Pratt explains. “Now, with right-sized devices, RDC technology presents some great opportunities for credit unions. They’re convenient, particularly for small businesses where owners don’t have the time to visit the credit union to make deposits. So there’s a big savings on time and transportation. Also, RDC improves cash flow because of same-day processing. Money is more quickly available at crucial times.”

Next: Marketing to members

Marketing to members

When it comes to marketing smartphone RDC apps, Bowen suggests two avenues. “A credit union that already has mobile banking products can add remote check capture as a new app. Or it can introduce RDC as a stand-alone app that members can download free from an online store, and the credit union then authenticates the user.”

As far as publicizing RDC availability, some credit unions use envelope stuffers, billboards, and branch displays. “A more difficult approach,” says Bowen, “is to offer RDC only to those members who can best use it. For example, you won’t approach members who aren’t in good standing.”

Advertising approaches also can follow a broadcast vs. narrowcast appeal. “You can do a Chase-style shotgun blast out to everybody, then qualify respondents,” says Bowen. “But you’ll have to train staff on how to deliver the bad news: ‘Sorry, we can’t accommodate your request at this time.’ ”

The other method is to set predefined criteria and then send e-mail invitations to a member subset.

Bowen says fees for an RDC app can be bundled among other products, such as online banking, for a monthly fee. “Or, you charge a small convenience fee for every deposit. The rationale is that the service saves members on postage or making trips to a branch or ATM.”

Teller capture

Pratt says credit unions now ask questions about branch and teller capture that are more strategic than technological. “On the branch side, credit unions were among the first to integrate check capture technology into their back-counter functions,” he says. “The problem was that tellers weren’t there to find mistakes or answer questions—a drag on efficiency. Now the question for credit unions is whether to integrate check capture right at the teller window for the maximum possible efficiency.”

“Teller capture is more integrated than standalone branch capture, where the scanner station is at the back of the branch, and therefore more efficient,” says Bowen. “But it’s also more expensive. Typically, if a credit union starts with branch capture, it’s slower to expand to teller capture because much of the potential savings has already been achieved, and due to the added integration and investment. Credit unions that start from scratch now usually will see teller capture as their best option.”

As far as next-step advances in RDC technology, Pratt says to look for convergences. “We’re looking closely at—and are close to—converging capabilities and technologies with our check capture devices. Along with getting faster, smaller, and less expensive, there will be such features as connectivity to smart cards and the ability to digitize other transactions and integrate checks with back-office functions like accounting software.”

Tilbury says to look for mobile deposit capability soon on iPads and Android tablets.

In the meantime, Pratt advises credit unions to look at teller capture and pursue small businesses.

“Also examine the implications of smartphone RDC,” he says. “Take into account the software necessary for the image correction, repair, and formatting that make smartphone images comply with applicable standards—items that aren’t issues when using a dedicated check scanner. But don’t be a late adapter; it puts you at a disadvantage on per-unit check processing.”